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Sunday, December 11, 2011

Some people think that the free market economy will create jobs for everyone if it is just left alone. We will never know if that theory is correct because no government will let the economy alone. However there are many nations in the world with minimal, ineffective, governments that have very little effect on their own economies. To my knowledge, all such nations are characterized by having mostly very poor people, and a handful of wealthy families owning almost everything. So, by inference, that supports another theory that says that a true free market economy leads to stagnation and great inequality of wealth. (But more about that another time.)

So, given the type of government that we have, what policy alternatives could lead to full employment, and maintain full employment? I think we have to start with the fact of today's very high productivity, which means that it only takes a fraction of the population to produce the goods and services that people need. That leads us to our first alternative, reducing the work week. If we could get most people to work no more than about 30 hours per week, that ought to keep almost everyone employed, fulfilling our basic needs. It would also be a boon to the recreation segment of the economy, because people would have a lot more time for sports, hobbies, and travel.

A second alternative is to put more money into the pockets of the common people. This will enable them to buy a lot of stuff that they don't really need, but would like to have. This causes businesses to produce more and hence hire more. With sufficient monetary stimulus of this type we should be able to keep the economy humming along at full capacity. With more people working and more income to businesses, tax revenue would increase, and this would, at least partially, pay for the monetary stimulus. If further revenues are required they can come from increasing taxes on those with very high incomes. If this approach is taken then America can continue to have lots of giant TV sets, smart phones, luxurious cars, muscular trucks, and full closets.

A third alternative is for the government to be much more aggressive on infrastructure maintenance and construction. This means letting contracts to build or repair bridges, roads, dams, railways, communication lines, hospitals, clinics, job training centers, and so on. The U.S. Postal Service is part of our present infrastructure, so if this policy were adopted we would certainly maintain Saturday delivery, and not close any existing post offices. On the contrary, new post offices would be built so that everyone has one close by.

A fourth alternative is to imitate the pharaohs of ancient Egypt, who employed large number of people to build pyramids. Nowadays, we would build space vehicles instead of pyramids. In addition to expanding the space program, we would increase support for scientific and industrial research, and for the arts.

The fifth alternative is to expand the military establishment. Of course we are already spending a large proportion of the government's revenue on defense. This goes not only to paying the salaries of the million and a half service personnel, but also to funding 100's of corporations, large and small, to develop and produce their equipment. (Think tanks, aircraft, ships, missiles, rifles, uniforms, and 100's of other things.) However, we have had a lot more men under arms in the past, so it would be possible to greatly increase the size of the military.

Those five methods are not mutually exclusive; any of them might be combined with any of the others. As a matter of fact, the nation is currently doing ALL of them, to some extent. To achieve full employment it would be necessary to increase one or more of these approaches.

Personally, I would prefer more of the first approach mentioned, reducing the length of the work week. This would be in line with the historical trend. Our great-great-grandfathers used to work 70 hours per week; popular demand, along with increasing productivity, gradually reduced the workweek until it reached it's current 40 hours. But since the 1950's the trend to reduce the workweek has not been evident. Why not resurrect this trend?